To start a business, there are formation steps that one has to go through. The steps include self-assessment, identification of a business idea, researching the idea, patenting the idea, formalizing the business vehicle, and branding or giving the business identity. Let us now take these steps one by one.
Successful businesspersons are individuals who are fully committed to their businesses. You have at the beginning to be prepared to put your entire mind in the business and have trust and believe in it. You have to be passionate about the business and forget about leisure, luxuries and some necessities too until the business takes off. The failure rate of many start-ups is very high and part of the causes of failure is a lack of such commitment. You will for sure make near-fatal mistakes. But the possibility of failure and the real prospects of making mistakes should not deter you. If you persevere and stay positive, mistakes that you make will turn into valuable lessons that will make you succeed. You have, therefore, to assess your level of commitment before venturing into business.
In a large enterprise, various functional departments and heads of those functions take care of a lot of operational activities and issues of the business. In a sole proprietorship or a small start-up, you are at once all these functions and heads of functions rolled into one person. You are the production, marketing, sales, purchasing, human resources, credit controller, operating and administrative, and accounting manager/officer. All the decisions in these functions are up to you.
An individual’s business has pros and cons. Pros include personal freedom, financial rewards, independence, satisfaction, and self-esteem. The cons include risk of failure and financial loss, long hours of hard work, loneliness, insecurity, and you could go at times without adequate money for necessities. You need to be aware of these pros and cons before plunging into a business.
Qualities of a good entrepreneur include courage, creativity, curiosity, determination, discipline, empathy, enthusiasm, flexibility, honesty, patience, responsibility, and leadership. Cultivate these qualities and you should be good to go.
Identify a good business idea
The next thing is to come up with a business idea. A business is born of a problem-solving business idea. The foremost and most important step in starting a business is to have a desire and an idea or a vision of what you want to do. To identify business ideas, you have to imagine and search yourself and the consumer universe to find viable ideas and things that you would love doing. You need to generate tossup and brainstorm ideas. The idea you come up with should have matchless appeal, solve a problem for people (filling a void, a gap or a need in the market) and above all be profitable. A good business idea is one that addresses people’s concerns or removes pain for them. However, it has to be an idea that you have the ability and resources to carry it out and should be able to turn out a profit in the short to medium-term.
The main source of business ideas is problems that have not been resolved and anything that makes life difficult or inconvenient for people. If you want to succeed in business, look for such problems, big or small and provide solutions for them. You can easily get very good prospects if you interact with people, consumers and end-users of products and services and see what bothers them, the pains and frustrations they go through on day to day basis. These should get you thinking of how to simplify things for them.
To have a good idea of what to do, you have to have a vision. Vision can be defined in many ways but it simply means the ability to see the end goal while still at the starting point. It is the ability to perceive something that is not visible yet. And that something is usually an attractive future position or a thing that is worth striving for. To have a vision, you have to mix thought, desire and faith. In Hebrews 11:1, Faith is explained as the assurance of things hoped for, the conviction of things not seen.
According to Craig Hill (Five Wealth Secrets 96% of Us Don’t Know-2018), having a vision is more important than having capital. Vision precedes capital. Capital is synonymous with the provision (read pro-vision where pro means in favour of or coming for vision). In this sense, provision can be seen as that which is provided for or in favour of the vision, as in to support the vision. Those who study the Bible might have seen that Proverbs 29:18 says that “where there is no vision, the people perish”.
A PDF article entitled How To Generate Creative Business Ideas gives 24 ways of generating business ideas. You can also read Six Thinking Hats by Edward de Bono (originally 1985).
A quick way of generating business ideas is to:
- Take stock of your knowledge, skills and experience.
- Solve a problem that bothers you or others.
- Talk to and observe customers at work to discover their needs.
- Produce a better and cheaper product than what is in the market.
- Fill gaps where customers are currently under-served in terms of products, services, delivery systems and customer care.
- Look at trends in the market and life.
- Create or invent a new product to solve an identified problem.
- Add value or improve an existing product.
- Produce something that enhances people’s pleasure and esteem.
- Save money and time for people.
- Produce more of what exists to satisfy the demand that currently outstrips supply.
- Travel, read, learn a language, attend lectures, create hobbies, watch the news, discuss the news with people, and do internships.
- You should also ask God to show you what you purpose in life or serving other people is, for business is about serving other people and not yourself. Focus on the welfare and satisfaction of the people using your ideas, products or services and you will be alright.
Think of your business ideas with the following in mind:
How to exit day to day management of the business
At some stage, once the business is making a sustainable profit, you need to systemize the business such that it can run alone with employees without your close supervision. This requires documented modern management structures, policies, procedures, rules, automated and digitized self-executing systems that require very little employee discretion and intervention to run the business. What is being said here is that your operations should be well-oiled and system-based as opposed to people-based operations that rely on people and your constant presence or close supervision to function well and deliver. Without this, your close supervision will be indispensable and you will be having a full-time job instead of owning a business. You want a business venture that can be systemized to run well with or without your presence to free you from being a slave instead of a master of your business. As you think of your business idea, you need to bear this in mind.
How to exit the business
At some point, you may want to sell your business and move on or turn it into a franchise. To be able to attract a buyer who can buy your business for a good value, you need to create value and goodwill in your business. Aspects that create value include facets such as a good location, protected intellectual property rights, unique processes, brand status, good reputation, a self-selling product or service, gifted and loyal employees, great customer care, and excellent relationships with stakeholders such as customers, suppliers, service providers, society and regulatory authorities or government. Other aspects that generate value are loyal customer base, and digitized and systemized business processes that create effectiveness, efficiency, great customer experience and allow operations to run without your close presence or supervision. Presence of structured planning, governance or management, production, operations, and financial management systems and procedures are also necessary and add value to the business.
To be able to franchise your business, you need to have a business idea that is valuable and attractive and can be legally protected from use by anyone without permission or licensing. You then need to systemize and document how the business operated such that all steps and performances can be repeated with the same consistent outputs efficiently and cost-effectively no matter where and by whom.
Research your idea
Once you have what seems to be a viable idea, it is important to research and confirm that it is the right fit for you and if the idea is indeed viable. This researching process can be part of strategic planning or business planning process or it can be just quick and lean research to establish viability before commencing any serious plans. The main purpose of this quick research includes:
- To nail down the unique value of the business idea and how to differentiate it from what is already in the market or what has been done before.
- To identify potential customers (or the ideal customers), market size, pricing latitude, and urgency of the need for the product from the standpoint of the customer.
- Initial effort involved in terms of cost of customer acquirement, initial investment, delivery costs, up-sell opportunities, evergreen prospects, time to come to the market and other challenges.
- To create information for constructing a quick budget to indicate possible revenue, costs and profit.
You can perform your research by conducting face to face or telephone interviews with your target subjects. You can also provide questionnaires for them to complete. Some of the things that you should do when carrying out your research are:
- Cost-benefit analysis
- Opportunity costs
- SWOT analysis: SWOT stands for strengths, weaknesses, opportunities, and threats.
- People, planet and profit: To succeed nowadays, you need to come up with business ideas that are good for the society (people), friendly to the environment (planet) and deliver handsome profits as well.
From the research, you should be able to sketch what you will do, how you will do it, the resources that may be needed to implement it, how much revenue might ensure from the idea when successfully implemented, and what profit will be left after all operating costs are deducted. Is this profit sufficient to compensate you for your time from the start or later when the business’s profitability goes beyond break-even point? This is where a quick forecast budget (see the topic on budgeting below) becomes handy at this stage of research.
Patent the business idea
If your idea is exclusive, original and unique, you should protect it from being used by anyone else other than you by registering a patent on it. A patent is a grant of protection rights over a creative invention. If you come up with a great and unique economically valuable idea, all you need to do is to apply to the appropriate authority to register it and give you a rights certificate on the satisfaction of set criteria and payment of set fees, which vary according to the type of IP.
Most jurisdictions have patent laws that give protective grants in the following areas:
- Patents: Patents protect unique inventions of a method, process, a device, or management strategies.
- Copyright: Copyrights protect creations such as arts, music, drawing, or literature.
- Trademarks: Trademarks protect symbols and marks such as a logo, name, or slogan.
- Trade dresses: This is a protection granted for all the marks, symbols, colours and writings on a cover surrounding a container such as a bottle or a can.
- Trade secrets: Trade secrets are usually formulae or recipes used for making a product such as Coca Cola drink or KFC chicken. These are usually protected using administrative methods such as having employees to sign confidentiality, non-disclosure, non-compete or secrecy documents.
Formalize your business
This is about choosing a legal structure and a business name and registering them. Before you formalize your business, you need first to decide what type of business you want to be in. A business falls into the following categories:
- Manufacturing: This is a business that makes tangible products that it then sells directly to consumers or through wholesalers and retailers.
- Wholesaling: This is a business that buys products from manufactures in bulk and sells them to retailers or consumers in bulk as well.
- Retailing: This business buys products in bulk and sells them in retail directly to end-users.
- Services: Service is a business activity that involves doing something or assisting a customer in one way or another to do something or to have something done. Service businesses provide intangible goods like consulting, cleaning, landscaping, treatment, insurance, accounting, banking, education, transportation, repairs, plumbing and all forms of artisans’ work. Services usually involve the application of knowledge, skills, experience, talent, language and personal energy and time coupled with the use or hire of tools, equipment (assets) to perform a task.
- Franchise: A franchise is fail-safe and repeatable operating systems to make or manufacture products or to sell products or services. The systems are then leased to others to operate and pay fees and royalties for using the systems. The concept involves developing a tested, working, valuable and legally protectable business model that can be rolled out anywhere by anybody. The owner of the franchise is known as franchisor and the operator is called a franchisee. On the flip side, your business idea can be to be an operator of a franchise. Perfect examples of a franchise business are Macdonald’s and KFC of USA.
Laws and regulations govern the formalization of a business. These rules and regulations vary from country to country and even from state to state in the case of the USA. This is because each jurisdiction has its set of laws. However, no matter where you are, the laws and rules tend to follow common commercial principles that differ only in some minor details. To be sure, you need to check your jurisdiction’s laws and regulations governing the registration of businesses. These are usually available on the registration authorities’ websites. Generally, formalization of a business involves several things that include:
- Deciding on the legal format or structure of your business as in sole proprietorship, partnership or a limited liability company. The legal structure chosen will influence the business name, your liability, and how you file and pay your taxes.
- Selection and registration of name and logo (trademarks) for protection. This is the process of registering the business. You require a name that is creative and catchy and easy to write, read, pronounce, remember and depicts or fits the nature of the business or products of the business. It should be one that you can easily extend to accommodate a URL.
- Selection and registration of website domain name and making website hosting arrangements.
- Obtaining necessary licenses/permits, and identification numbers for taxation and any other regulatory levy fees. Formalization and registration process may require a physical and mailing address, telephone and email.
Read more about all these in a PDF article entitled Guidelines: How to start and run a business
Brand your business
A brand is an identity like a name usually with a positive reputation in the eyes of consumers. Branding is the action where you burn or stamp your business name on the product and engaging in marketing activities to popularize the brand. Elements of branding such as name and logo should be carefully considered at the formation stage. Branding can be in two phases as follows:
Creating an identity
To form a brand or identity, you create and combine the business name and things like, logo, tagline, colour schemes and letter fonts or styles to form a combined name and logo for the business, which now becomes the identity of the product and the business. The elements involved in an identity include:
- Name: The chosen name should be catchy, extendable to include a URL, and easy to pronounce, read, write, and remember.
- Logo: The logo is formed of designs, symbols, marks, colour schemes, and letter styles. It should be unique, attention-grabbing, easy to identify, and mirror the nature of the business.
- Brand name or symbol: This is a name, symbol, or sign that can appear on packages of all products of the business together with the name of the manufacturer of the product, the logo of the business in addition to a symbol like an orange, tomato or pepper image depicting the product in the package.
- Colour schemes: Font (letter styles) and background colour schemes form part of the identity.
- Tagline: This a short and catchy words that are placed beneath the logo which portray a philosophy or a promise. A central bank, which has a mandate of keeping inflation in check, might have a tagline like- protecting the value of your money.
- Contacts: These are things like mailing and physical address, telephone, email, a website domain, and social media channels (Facebook, Twitter, Linkedin, etc).
- Tax and other identification numbers for registration of the business for statutory collections and levies.
- Bank account.
Project the identity
Later on, once the business is up and running, it will be necessary to promote identity as a marketing strategy. This phase involves performing marketing activities that establish a connection in the eyes of the consumers between a thing that identifies the product such as a logo, the business’s name, or the product’s name and the product’s benefits that consumers have come to perceive and like. The first line of projection is to have all the above identity marks reflected on all stationery such as letterheads, quotation forms, invoices, credit notes, delivery notes, receipts, application forms, envelopes, complimentary slips, writing note pads, packaging materials, and business (calling) cards. Other areas of reflection include uniforms, dress codes, displays, marketing materials, signs and on strategic places and surfaces around the premises including walls, furniture, fittings, equipment, tools, etc. All the prints in all stationery documents and other items must be consistent in font, colour, and design and that all documents carry the same business colours, signage, slogans and logo. The second part of the projection is to perform marketing activities that are aimed at bringing awareness and creating a connection between the identity and the features, benefits of the business or product so that consumers can make the association, and create a trust.
The purpose of branding is to create an identity for the business beyond the name and to connect that identity and the benefits of the product in the minds of consumers. Name, logos, and packaging establish the identity of the product. Quality, performance, durability, consistency of quality and performance, prestige, image, saving time and money, boosting social status, solving a problem, providing entertainment, reducing worry etc are benefits that give a product reputation and brand status. Consumers should be able to connect these two aspects i.e. identity and benefits and that is the trick in marketing.